Delaware employers and employees are going to experience a change in payroll deductions with the enactment of the Delaware Paid Family and Medical Leave (PFML) program. Signed into law in May 2022, this legislation is designed to provide wage replacement benefits to eligible employees who require time away from work for qualifying family and medical reasons. Employers with at least 10 employees are generally required to participate in the program.
The Delaware PFML program allows employees to take paid time off for various circumstances. This includes medical leave for health conditions, including pregnancy and childbirth, parental leave to bond with a new child, and family leave to care for a seriously ill family member or address a military exigency. Employees may begin submitting claims for paid leave benefits starting January 1, 2026.
The duration varies based on the type of leave taken. Up to 12 weeks per year can be for parental leave and up to six weeks every 24 months for medical, family caregiving, or military-related leave. Employees are limited to a total of 12 weeks of paid leave per year.
Funding for the program commenced through payroll deductions on January 1, 2025. Employers have until April 30, 2025, to submit their initial Delaware PFML contribution payments. Up to 50% of these contributions can be deducted from employee wages.
Withholdings
Employers must withhold up to 0.8% of taxable wages for payroll tax contributions. Employers with 10 to 24 employees only need to collect and contribute the parental leave portion of the tax (0.32%). However, employers with 25 or more employees must collect and contribute to all three parts of the program: parental leave, medical leave (0.40%), and family caregiver leave (0.08%). The funds collected in 2025 will be used to establish Delaware’s PFML account.
Delaware employers must register for the PFML program through the Labor First portal. The state determines an employer’s obligation through a “threshold number,” calculated based on the 12 months from January 1, 2024, to December 31, 2024.
Qualification Requirements
To qualify for the program, an employee must have worked for the same employer for at least 12 months and clocked at least 1,250 hours (approximately 25 hours weekly) in the previous year. Eligible employees can receive up to 80% of their wages, capped at $900 weekly.
Part-time employees may qualify if they meet the 12-month employment and 1,250-hour requirements. Seasonal and temporary employees typically won’t be covered unless they meet the eligibility requirements over time.
Business owners can be considered employees under the program but must receive a fixed salary and a W-2 rather than earnings based on company profits. To qualify, employees working outside Delaware must perform at least 60% of their work within the state. Those with multi-state responsibilities must track their hours spent in Delaware, following the same rules applied to state income tax. Telecommuters residing outside Delaware are generally not covered. If an employee splits their work between Delaware and another state, they must work at least 60% of their time in Delaware to be eligible. If remote work reduces their in-state hours below the threshold, they will not qualify for Delaware Paid Leave benefits.
Exemptions
Under certain circumstances, employers and employees in special situations might be eligible for a PFML waiver. For example, employers wanting to use a private plan can apply for a private plan exemption, or employees hired to work on a temporary basis can apply for a waiver excluding them from payroll deductions.
Federal agencies, including the armed forces, are exempt because their employees’ benefits are defined by the federal government rather than individual states. Similarly, certain groups are excluded due to distinct governing regulations. Railroad employees, such as those working for Amtrak, fall under the National Railway Labor Act, which establishes their benefits separately from state or federal oversight. Tribal governments, as sovereign nations, have the authority to establish their own rules regarding employee benefits for their government workers.
Seasonal businesses that close for at least 30 consecutive days are completely excluded, and their employees are ineligible for benefits. However, businesses that engage in commercial activities during shutdowns may not qualify for this exclusion. Schools, including public, private, charter, and religious institutions—are not deemed seasonal businesses and must provide PFML benefits to their employees.
Non-Delaware-based businesses are also exempt from participation if they do not have employees physically working in Delaware. The location of an employer’s office does not determine eligibility; instead, it is where the employees perform their work. Depending on the number of employees working within the state, a company with remote workers who reside in Delaware may be subject to the PFML program.
Resources
Resources such as frequently asked questions, implementation guides, and a Benefits Contribution Calculator are available on the Delaware Department of Labor’s website. This calculator allows employers and employees to estimate weekly contributions and benefits based on annual wages, selected leave types, and required employee contributions.
Starting January 1, 2025, employers must prominently display a workplace poster in a visible area of their business. This poster must be available in English, Spanish, and any other language spoken as a first language by at least 5% of the workforce. To help businesses meet this requirement, the Delaware Department of Labor has issued a Model Notice of Employee Rights.
As Delaware moves forward with this program, businesses and workers must understand and implement changes. Employers should take steps to ensure compliance, assess the financial impact, and communicate with their teams about what to expect. Employees should familiarize themselves with their rights and benefits under the program to make informed decisions about their leave options. By preparing early, employers and employees can navigate these changes smoothly and fully utilize this program’s protections and support. Contact your Stephano Slack tax manager/partner at 610-687-1600 or [email protected] to discuss your situation.
Author Brian Jennings is a tax associate specializing in business taxation for corporate and pass-through entities. He focuses on reviewing and adjusting company financials to prepare their returns and lower their tax liabilities, whether on the corporate level or passed on to the individual owners. He can be contacted at 302-295-1036 or [email protected].
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